New Study Shows How Arizona Parents Spend Education Savings Accounts

Kasey Locke’s preschool teachers in Arizona tried to help her focus and stay on task at school. But as Kasey entered kindergarten, her parents, Jeff and Rebecca, wanted to use a specific treatment to help their daughter succeed.

Doctors diagnosed Kasey with autism at 3 years old, and by the time she was ready for kindergarten, Jeff and Rebecca decided Applied Behavioral Analysis (ABA) was the best approach. Unfortunately, Kasey’s new teachers struggled with the techniques.

“They couldn’t really ever bake the whole ABA stuff into the cake,” Jeff said. “We did look into private schooling, but there was no way we could financially reach that.”

The Locke family applied for an education savings account (ESA), and with a new school and continued educational therapy, Kasey is thriving. Her father said the program has been a huge success for his family, and even Kasey’s longtime therapist noticed a difference in her demeanor and performance in the classroom.

“So far, it’s just been great,” he said. “It has opened a lot of doors.”

With an ESA, a state deposits funds into a government-authorized savings account, often distributed to families via a debit card. Parents can then use those dollars, like the Lockes, to pay for customized educational services, including private school tuition and much more. Families can save money from year to year and, in some states, even use the accounts for college tuition and fees.

The Friedman Foundation for Educational Choice released the follow-up study today, The Education Debit Card II, to check in on how other Arizona parents are spending their ESA funds. And our findings indicate customization continues to play a major part in the story of ESA use among families, with nearly 30 percent of the 1,416 families in this study using their ESAs for multiple purposes.

In its 2013 report, The Education Debit Card, the Friedman Foundation documented Arizona ESA parents’ spending data between September 2011 and March 2013. That study found, during that time period, 66 percent of ESA recipients used their accounts for one educational purpose, while 34 percent of account holders used their children’s funds to pay for multiple education-related products and services. Today’s follow-up report uses Arizona Department of Education data from the fourth quarter of fiscal year 2013–14 and all of fiscal year 2014–15, and because of several changes to the education savings account program in that time, The Education Debit Card II shows parents’ spending patterns have adjusted slightly.

For instance, the state legislature expanded eligibility criteria during that time to include not just children with special needs, but also children from “failing” schools, adopted children, and incoming kindergarteners.

The following results demonstrate that with a larger and different cohort of students over a different time period, a similar—albeit smaller—percentage of students still use ESAs to purchase multiple learning options. New eligibility criteria and the passage of time do not change how families value the accounts’ flexibility.

• 83 percent of ESA funds were used to pay for private school tuition, compared with 85 percent reported three years ago
• 28 percent of account holders spent their funds on multiple educational products and services, a 6 percent decrease from our earlier study
• Parents spent more money on tutoring (7.1 percent of all money expended) in this data set than in the prior study (4.2 percent)
• Parents spent less on educational therapy (5.3 percent of all expenses) than in the prior study (7.1 percent)
• More money was spent over this time period, (69 percent) than in our first report (57 percent), meaning parents are rolling fewer ESA dollars over for future expenses

What do these results mean for policymakers?

1. Allow more students to participate in an ESA program. Every parent should have the chance to find a quality education for their child, and increasingly, that means more than a classroom. From personal tutors and online classes to science kits and college courses, education savings accounts are the most flexible resource available to students. The data in this paper demonstrate that, when given the opportunity, families will make multiple unique and personal choices for how and where their children learn.Critically, even among those who only choose a private school for their children, ESAs give families the chance to access a type or quality of education that their assigned neighborhood public schools might not provide.

2. Make sure the accounts are adequate to provide a quality education. The average education savings account in Arizona is approximately $5,000, whereas the average amount taxpayers spend per student in that state is nearly $9,000. Kids should not be shortchanged on their education simply because they don’t happen to be suited to a traditional public school. Though Arizona’s accounts may help most families cover tuition for their children in elementary or middle school, future expenses and additional educational therapies require more financial resources. High school tuition in Arizona, along with college tuition, can be $10,000 to $14,000 or more. Lawmakers should make education funding fair for all students.

3. Limit regulations on providers and avoid state testing mandates. Policymakers should carefully write provisions that provide transparency to taxpayers and families but protect account holders’ and private schools’ autonomy. Lawmakers should avoid mandating that students take a uniform statewide test as those tests are often not in sync with private-school and customized curricula. Research also suggests such regulations discourage private school participation in educational choice programs, limiting the choices available to families. Moreover, parents rank school outcomes on state tests as the least important information they consider when engaging in the school selection process.

Policymakers should consider transparency to have two distinct components: accountability for academic outcomes and accountability for taxpayer dollars. Parents are responsible for making sure their children are succeeding and directing their children’s future if a child is not. If policymakers feel they must consider testing mandates at all, they should require a third-party researcher collect nationally norm-referenced test results from participating students and report periodically on those results. In this way, the test will not dictate how and what schools choose to teach.

In fact, in Arizona, survey evidence finds that 93 percent of private schools participating in the state’s tax-credit scholarship program already ask students to take a nationally norm-referenced test. State policymakers should also provide fiscal transparency to taxpayers. Arizona’s experience indicates that effective measures include quarterly reporting requirements and individual account audits. The state should add dual checks on expenditures so that both the provider and account holder verify a purchase before it is complete. This process would improve the state’s fiscal transparency for ESAs and help to stop fraudulent purchases before they happen.

Customization continues to be a valuable feature of ESAs, and our findings in this second review of Arizona parent use of Empowerment Scholarship Accounts demonstrate that ESAs are functionally different from private school scholarship programs, such as school vouchers or tax-credit scholarships. Moreover, our findings suggest ESAs do not become vouchers over time. Families take advantage of the flexibility provided through the unique structure of ESAs to access a variety of learning options.

One shining example is Kasey. She has been using an education savings account for more than four years now, and her dad Jeff says she continues to blossom with a tailored learning approach. But when ESAs came along, he said “it was almost too good to be true.” Happily, Arizona leaders secured that educational lifeline for families like the Lockes. But unfortunately, not nearly enough families can say they have access to that same opportunity. We look forward to the day we can say they do.